Inheritance

The roots of China’s recent boom extend deep into its imperial and communist past. But tradition’s legacy is a complicated one. To achieve modern development, China had to throw off the “yoke” of traditional society. Yet the long traditions of centralized government administration, kin-based entrepreneurism, and value placed on education and diligence prepared the Chinese well for capitalism. Despite catastrophes like the Great Leap Forward and the famine in its wake, Mao Zedong’s nation building efforts between the founding of the PRC in 1949 and the unleashing of the Cultural Revolution in 1966 laid socialist foundations for the subsequent boom. Even the disastrous, decade-long Great Proletarian Cultural Revolution contributed to the boom: By eroding public support for radical politics, the ground was cleared for a transition from revolution to reform—for new policies that were gradualist, internationalist and capitalist.

The Cultural Revolution Broke All Patterns of Restraint

The Cultural Revolution

China’s Growth is Like a Slingshot

An Opportunity to Question the Whole Existing System

Trevor Houser

Partner, Rhodium Group

Trevor Houser, visiting fellow at the Peterson Institute for International Economics and the Colin Powell Center for Policy Studies, is a partner at the Rhodium Group (RHG), a New York-based research firm, and adjunct professor at the City College of New York. His work focuses on energy markets, climate change, and the role emerging Asian countries play in both. His publications include China's Energy Evolution: The Consequences of Powering Growth at Home and Abroad (forthcoming, with Daniel Rosen), Leveling the Carbon Playing Field: International Competition and US Climate Policy Design (2008), and China Energy: A Guide for the Perplexed (2007).

From an economic perspective, as important as what happened in those 30 years, is what happened in the 30 years before. So, the period from '48 to '78 laid the groundwork for the type of dynamism that we saw after. And the analogy that I like to use is a slingshot. So, since 1978, we’ve averaged 9% economic growth in China and the reason, in part, that that growth was so fast, was because the growth before it was so distorted. So, it’s like you take a slingshot and if you pull it in the wrong direction for 30 years and then you let it go, the speed with which the stone you have in your slingshot travels is going to be light speed. And that’s what happened in China. So, in 1949, when the CCP comes to power, Mao Zedong takes the country, the People’s Republic of China, in an economic direction that is not conducive to its resource endowment. China has a lot of labor, doesn’t have a lot of resources, and doesn’t have a lot of capital. Other countries in East Asia with that type of endowment, like Japan and Korea and Southeast Asia, were doing the types of economic activities that having a lot of labor makes you very good at. So, we’re talking about light manufacturing, like toys and textiles and apparel. China, on the contrary, decided to follow a Soviet model of industrialization. So, instead of doing things that required a lot of labor, it decided to do things that took a lot of resources and a lot of capital. So, steel and aluminum and cement, a lot of capital-intensive heavy industry. Over 30 years, that economic strategy brought the country to the point of famine, a number of times...